What the FDIC insures, and what reported changes mean
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The Trump administration has discussed plans to collapse functions of the Federal Deposit Insurance Corporation into other regulators — setting the stage for further cuts to the critical regulatory agency.
Why it matters: The idea raises questions as to what would happen to the FDIC's two vital roles in the U.S. banking system: insuring depositors' funds and supervising banks for safety and soundness.
The latest: DOGE-driven cuts at the regulator, which already experienced staffing strain ahead of the Trump 2.0 takeover, could hinder crucial safety and soundness examinations of the thousands of banks under its purview, the FDIC's inspector general warned in a March report.
- As of March, hundreds of employees had left through buyout offers and dismissals.
- It takes years of training for new commissioners to be able to lead bank examinations, Axios' Courtenay Brown notes.
The big picture: Even if the FDIC is collapsed, that doesn't automatically mean that deposit insurance will be impacted. A February WSJ report, as well as others in December, say the White House is considering moving that function directly into the Treasury Department.
- For what it's worth, the banking industry has been calling for deposit insurance to be expanded following recent midsize bank failures.
Meanwhile, Trump's team is reportedly looking at combining the FDIC's regulatory role with that of another existing bank regulator housed under Treasury, the OCC.
- Trump's been discussing shrinking or eliminating the list of banking regulators since at least December.
- And he's already targeted one, the Consumer Financial Protection Bureau, firing the previous director and freezing much of the agency's work.
Reality check: The most recent discussions have been described as "fluid," and there are no firm details yet on whether, or how, either function of the FDIC would be retained.
- Critics of the plan have cited the brand value alone of the FDIC's insurance function as being vital to consumer confidence in the U.S. banking system.
The White House did not respond to Axios's request for comment.
What is the FDIC?
The FDIC is an independent federal agency that insures depositors for certain account types, up to $250,000, at more than 4,500 member banks.
- The FDIC is meant to protect depositors in the event of bank failure. It was created during the Great Depression in 1933, in which about 9,000 banks failed and about $7 billion in depositor assets were wiped out.
- The FDIC is funded by insurance premiums that banks pay, as well as interest earned on its Deposit Insurance Fund, which is invested in U.S. government obligations.
- In addition to insuring depositors, the FDIC supervises banks for safety and consumer protection.
What does the FDIC protect?
- Protected account types include checking accounts, savings accounts, money market deposit accounts (MMDAs), pre-paid cards, and certificates of deposit (CDs)
- Account types that aren't covered include stock investments, bond investments, mutual funds, crypto assets, life insurance policies, annuities, municipal securities, and safe deposit boxes contents.
Does the FDIC protect Venmo transactions?
- Even though millions of Americans use services like PayPal, Venmo, and Cash App, money stored in the platforms themselves are not covered by the FDIC.
- Cash App cards are eligible for FDIC "pass-through" insurance ("insuring depositors whose funds are placed and held at an FDIC-insured bank through a third party," per the FDIC) through "program banks" – Wells Fargo and Sutton Bank.
- In that case, the FDIC only insures your balance if the program bank holding those funds fails, but not the failure of the app itself.
- Both Venmo and CashApp also protect money associated with teen users through pass-through insurance, but in both cases, FDIC is protecting against the failure of the banks linked to those accounts and not the services themselves.
- PayPal does the same thing with its savings account, with funds stored and protected through Synchrony Bank, but funds stored in PayPal itself are not protected.
What is the NCUA?
- The National Credit Union Administration (NCUA) is a separate agency that regulates credit unions and insures their depositors. About 98% of credit unions are federally insured.
- Like the FDIC, the NCUA insures up to $250,000 per depositor.
- Insured accounts include checking accounts, savings accounts, money market deposit accounts, CDs, and individual retirement accounts (IRAs).
- Accounts that aren't insured include stocks, bonds, mutual funds, annuities, life insurance policies, municipal securities, and safe deposit box contents.
Editor's note: This story was updated with new developments.
